Definition of Export Credit Guarantee Corporation

Introduction

In order to provide export credit insurance support to Indian exporters, the government of indie set up the export risks insurance corporation in July, 1957. It was transformed into export credit and Guarantee Corporation limited in 1964. To bring the Indian identity into sharper focus, the corporation’s name was once again changed to the present export credit corporation of India limited in 1983. ECGC is a company wholly owned by the government of India is functions under the administrative control of the ministry of commerce and in manager by a board of directors represent government, banking, insurance, trade, industry, etc.

The cover issued by ECGA can be divided broadly into four groups.

Standard policy issued to exporters to protect they against payment risks involved in experts on short-term credit and small exporter’s policy issued for the same purpose to exporters with small export;

Specific policies designed to protect Indian firms against payment risks involved (a) exporters or deferred terms of payment (b) service rendered to foreign parties and (c) construction works and turnkey projects undertaken abroad.

Financial guarantee issued to banks in India to protect they from risks of loss involved in their extending financial support to export to exporters as the pre-shipment as well as post-shipment stages and

Special schemes, viz., transfer guarantee means to protect banks which add confirmation to letters of credit opened by foreign banks. Insurance cover for buyer’s credit, line of credit, overseas investment insurance and exchange fluctuation risk insurance.

Shipments Comprehensive Risks Policy - (SCR) or Standard Policy

Shipments (comprehensive Risks) policy, which is commonly known as the standard policy, in the one ideally suited to cover risks in respect of goods exported on short-term credit, i.e. neither credit nor exceeding 180 days.

This policy covers both commercial and political risks from the date of shipment. it is issued to exporters whose anticipated export turnover for the next 12 months is more than ` 25 lakhs. The appropriate policy for exporter with an anticipated turnover of less than ` 25 lakhs in the small exporters’ policy, which is described in the next section.

Risks Covered Under the Policy

Under the shipments (Comprehensive Risks) Policy, the corporation covers from the date of shipment, the following risks:

Commercial Risks

Insolvency of the buyer

Failure of the buyer to make the payment due within a specified period, normally 4 months from the due date.

Buyer’s failure to accept the goods, subject to certain conditions.

Political Risks

Imposition of restriction by Government of the buyer’s country or any Government action which may block or delay the transfer of payment made by the buyer.

War, civil war, revolution of civil distribution in the buyer’s country.

New import restriction or cancellation of a valid import license.

Interruption of diversion of voyage outside India resulting in payment of additional freight of insurance charges which cannot be recovered from the buyer.

Any other cause of loss occurring outside India, nor normally insured by general insurers and beyond the control of both the exporter and the buyer.

Risks not Covered

The policy does not cover losses due to the following risks

Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyer’s country in his favor.

Causes inherent in the nature of the goods.

Buyer’s failure to obtain necessary import of exchange authorization from authorities in his country.

Insolvency or default of any agent of the exporter or of the collecting bank.

Loss or damage to goods which can be covered by general insurers.

Exchange rate fluctuation.

Failure of the exporter to fulfill terms of the export contract or negligence of his part.

Shipments

The shipments (comprehensive Risks) policy is meant to cover all the shipments that may be made by an exporter of credit terms during a period of 24 months ahead. in other works, as exporter is required to get the insurance provides by the policy for each and every shipment that may be made by his in the next 2 months on DP, DA or open delivery terms to all buyers other that his own associates, the policy cannot be issued for selected shipments, selected buyers of selecting market.

Exclusions

An exporter may of course, exclude shipments made against advance payments of those which are supported by irrevocable letters of credit, which carry the confirmation of banks in India, since he faces no risk in respect of such transactions. Where an exporter is dealing with several distinct items, ECGA may agree to exclude all shipments of certain agreed items, provided that what is offered for insurance consists of all items of allied nature and offers the corporation a reasonable portion of the exporter’s total business with a fair spread of risks.

Shipment Against Letters of Credit

Unless they are confirmed by banks in India, payments under irrevocable letters of credit are subject political risks. Exporters, therefore, will be well advised to get them also covered under the policy. Such shipments, which are excluded from the scope of the policy, can be covered under it if an exporter so desires. Lower premium rates are applied to them because they do not involve commercial risks and only the political risks have to be covered. For shipment made against irrevocable letter of credit, an exporter has option to obtain either political risk cover only or cover for comprehensive risks, i.e. for all political risks and the risks of insolvency or default of the bank opening the irrevocable letter of credit. If either case, cover will be provided by the corporation only if the exporter agreed to get all the shipments made against irrevocable letters of credit covered under the policy. Cover will not be available for selected transactions.

Shipments to Associates

Shipments to associates, i.e., foreign buyers in whose business the exporters have a financial interest are normally excluded from the policy. They can, however, be covered against political risks under the policy if an exporter so desires. Where the associate in a public limited company in which the exporter’s share holding does not exceed 40% cover can be provided against insolvency risks in addition to all the political risks.

Shipment on Consignment Basis

Shipment which are made to an overseas agent under an agreement that he will receive the goods as agent of the exporter and remit the proceeds of their being sold by him are excluded from the scope of the policy. However, if an exporter wants it, the corporation can get they included under the policy. However, if an exporter wants it, the corporation can get they included under the policy. Cover will be provided only against political risks, since the agent acts for the exporter. If however, goods are sold to ultimate buyers or credit terms, comprehensive risks cover can be provided for sales to such ultimate buyer if the exporter wants such cover.

Shipment Made by Air

Where shipments are made by air, the buyers are often able to obtain delivery of the goods from the airlines before making payment of the bills of accepting them for payment, as the case may be. If the buyer fails to make the payment subsequently as per the contract, the risk of loss will not be covered under the policy if premium has been paid on the shipment for DP or DA terms of payment. An exporter can, however get cover for such contingencies also if he obtains credit limit of such buyers or open delivery terms and also pays premium as rates applicable to open delivery terms.

Additional Cover for Shipments to Government Buyers

All shipments made to government buyers are covered under the policy the corpo-ration and pay premium as rates applicable for covering political risks. The corporation’s specific approval should be obtained where the country is in the list of restricted cover countries. This cover does not extend to commercial risks like default or non-acceptance of goods.

If an exporter wants these risks also to be covered, then he should write to the corporation asking that risk number described in the policy be also covered. It his letter the exporter should give information about the name and address of the buyer, the status of the buyer and the details of the contract if the corporation approved the request, the shipments concerned will be covered against comprehensive risks if the exporter pays premium of those shipments as rates applicable for comprehensive risks. it may be noted that ht corporation will consider the following as government buyers; (a) a department of the central government and (b) if the buyer will be a government body like a board, state government, municipality of government owned corporations companies, if the performance of the contract is guaranteed by the central government.

Contract Cover

The standard policy provides covers only for the post-shipment stage, i.e. from the date of shipment cover for pre-shipment losses, i.e. losses which may be sustained by an exporter due to impossibility of exporting goods already manufactured or purchased for reasons like ban of export of the item restrictions or import of the item into the buyer’s country or war, civil war, etc, are not covered under the policy because the risks is very low in respect of raw materials, primary products, consumer goods or consumer durables which cash easily be resold. Where however the export involved at item which is manufactured to the non-standard specifications of a buyer, cover can be provided for pre-shipment risks as well as the post shipment risks, by means of an endorsement to the standard policy.

Shipment made on Credit Exceeding 180 Days

The policy is means to provide cover for shipments neither involving a credit period nor exceeding 180 days. In exceptional cases, however cover may be granted for shipments with longer credit period provided that such longer credits are justifiable for the export items concerned.

Small Exporter’s Policy

The small exporter’s policy is basically the standard policy, incorporating certain improvement in terms of cover, in order encourage small exporters to obtain and operate the policy. It will be issued to exports whose anticipated export turnover for the next 12 months does not exceed ` 25 lakhs.

The small exporter’s policy differs from the standard policy in the following respects.

Period of policy: small exporter’s policy will be issued for a period of 12 months as against 24 months in the case of standard policy

Minimum premium: minimum premium payable for a small exporter’s policy will be an amount equal to .3% of the anticipated turnover of D/P and D/A terms of payment plus where the exporter seeks cover also for L/A shipment, .0% of the anticipated turnover of L/A terms of ` 1000 whichever is higher.

Declaration of shipment need to be declared only twice. In the seventh month of shipments made in the fires six months of the policy period and in the 13the moth for shipments made in the last six months of the policy period.

Declaration of overdue payments: small exporters are required to submit monthly declarations of all payments remaining overdue by more than 60 days from the due date, as against 30 days in the case of exporters holding the standard policy

Percentage of cover: for shipments covered under the small exporter’s policy, the corporation will pay claims to the extent of 95% where the loss is due to commercial risks and 00% if the loss is caused by any of the political risks under the standard policy, the extent of cover is 90% for both commercial and political risks.

Waiting period for claims: the normal waiting period of months under the standard policy has been halved in the case of claims arising under the small exporters’ policy.

Change in terms of payment of extension in credit period: in order to enable small exporters to deal wing their buyers in flexible manner, the following facilities are allowed a small exporters may, without the prior approval of the Corporation, convert a D/P bill in to D/A bill, provided that he has already obtained suitable credit limit on the buyer of D/A terms

Where the value of the bill is no more than ` 3 lakhs, conversion of d/p bill is permitted even if credit limit of the buyer has been obtained on d/p terms only, but nor more than one claim, can be considered during the policy period on account of losses arising following such conversions.

A small exporter may, without the prior approval of the corporation, extend the due date of payment of a d/a bill provided that a credit limit on the buyer of terms is in force as the time of such extension.

Resale of unaccepted goods: if, upon non-acceptance of goods by a buyer, the exporter sells the goods to an alternate buyer without obtaining prior approval of the corporation as required under the policy, the corporation may consider payment of claims up to an amount considered reasonable by the corporation, provided that the corporation is satisfied that the exporter did his best under the circumstances to minimize the loss.

Claims due to loss of damage to goods. The corporation may also consider payment of claims up to an amount considered by is as reasonable where loss is due to loss or damage to the goods due to certain risks which neither are nor normally included in general insurance policies. The exporters should, in such cases, have exercised normal core in obtaining the general insurance policies.

In all other respects, the small exporter’s policy is the same as the standard policy.

Specific Policy

The Standard Policy is a whole turnover policy designed to provide a continuing insurance for the regular flow of an exporter’s shipments for which credit period does not exceed 180 days. Contracts for export of capital goods or turnkey projects or construction works or rendering services abroad are not of a repetitive nature and they involve medium/ long-term credits. Such transactions are, therefore, insured by ECGC on a case-to-case basis under specific policies.\

All contracts for export on deferred payment terms and contracts for turnkey projects and construction works abroad require prior clearance of Authorized Dealers, EXIM Bank or the Working Group in terms of powers delegated to them as per exchange control regulations (Kindly refer to ‘Projects Exports Manual’ of Reserve Bank of India.

Applications for the purpose are to be submitted to the Authorized Dealer (the financing bank), which will forward applications beyond its delegated powers to the EXIM Bank. Proposals for Specific Policy are to be made to ECGC after the contract has been cleared by the Authorized Dealer, EXIM Bank or the Working Group, as the case may be.

Specific policy for supply contracts may take any of the following

Specific Shipment (Comprehensive Risks) Policy;

Specific Shipments (Political Risks) Policy;

Specific Contract (Comprehensive Risks) Policy; and

Specific Contract (Political Risks) Policy.

Specific Shipments (Comprehensive Risks) Policy provides cover against all the risks covered under the Standard Policy for shipments to be made under the contract in question (For details of risks, click here). It is, therefore, the appropriate policy for an exporter to take if the payments are open to both commercial and political risks. Where the Commercial risks are absent, e.g. where the payments are guaranteed by a bank or by the Government of the overseas country, the exporter may opt for the Specific Shipments (Political Risks) Policy for which the premium rate will be lower than that for the Comprehensive Risks Policy.

Specific Contract Policy (which also can be for comprehensive or political risks) differs from Shipments Policy in that the former provides the exporter not only with the post-shipment cover like the latter but also with some pre-shipment cover from the date of contract. In case shipments could not be made due to any of the risks covered or due to restriction on export of the goods from India, the loss in respect of unshipped goods will also be covered under Contract Policies. Premium rates for Contract Policies will be higher than that for Shipment Policies.

To be eligible for cover under specific policies, the terms of payment for the export contracts should be in line with customary practices in the international markets. At least, 15% of the contract value should be payable before shipment including an advance payment of at least 5%. The balance amount should be repayable in equal semi-annual installments commencing six months after the date of shipment. Where the contract provides for supply and erection of a complete plant, the first installment may fall due after six months from the date of commissioning of the plant. The credit period should not normally exceed 5 years. Longer credit period may be approved only in the case of exceptionally large projects if the circumstances of the case justify it. Adequate security should be obtained in the form of government guarantee or bank guarantee.

In order to be sure about the availability of the cover, exporters are advised to get in-principle approval of ECGC and obtain the premium rates well before concluding contracts. If the terms and conditions of the contract undergo any change subsequently, ECGC should be informed of the same, so that changes, if any, in the applicable premium rates can be ascertained. The entire premium is normally payable in advance. Installment facility may be granted for payment of a part of the premium if the contract value is very large and if the shipments are spread over a relatively long period, but the entire premium will have to be paid by the time the last shipment is made. Interest will be charged for the installment facility.

Guarantees to Banks

Timely and adequate credit facilities at the pre-shipment stage are essential for exporters to realize their full export potential. Exporters may not, however, be easily able to obtain such facilities from their bankers for several reasons, e.g. the exporter may be relatively new to export business, the extent of facilities needed by him may be out of proportion to the equity of the firms or the value of collateral offered by the exporter may be inadequate. The Packing Credit Guarantee of ECGC helps the exporter to obtain better and adequate facilities from their bankers. The Guarantees assure the banks that, in the event of an exporter failing to discharge his liabilities to the bank, ECGC would make good a major portion of the bank’s loss. The bank is required to be co-insurer to the extent of the remaining loss. To meet the varying needs of exporters, the corporation has evolved the following types of Guarantee

Packing Credit Guarantee

Export Production Finance Guarantee

Post shipment export Credit guarantee

Export Finance Guarantee

Export Performance Indemnity; and

Export Finance (Overseas Lending) Guarantee

Packing Credit Guarantee

Any loan given to an exporter for the manufacture, processing, purchasing or packing of goods meant for export against a firm order or Letter of Credit qualifies for Packing Credit Guarantee. Pre-shipment advances given by banks to parties who enter into contracts for export of services or for construction works abroad to meet preliminary expenses in connection with such contracts are also eligible for cover under the Guarantee. The requirement of lodgement of Letter of Credit or export order for granting packing credit advances is waived if the bank grants such advances in accordance with the instructions of the Reserve Bank of India in that respect.

The Guarantee, issued for a period of 12 months based on a proposal from the bank, covers all the advances that may be made by the bank during the period to an individual exporter within an approved limit. The bank is required to submit monthly declarations of advances and repayments and to pay premium at the rate of 13 paise per ` 100 per month on the highest amount outstanding on any day. Approval of ECGC has to be obtained if the period for repayment of any advance is to be extended beyond 360 days from the date of advance. If the bank apprehends a loss, it is required to call back the outstanding advances and to take suitable action to prevent or to minimize the loss including any action that may be suggested by ECGC. The bank will be entitled to claim 66 2/3% of its loss from ECGC if the entire amount due from the exporter is not recovered within a period of four months from the due date of repayment. The claims are payable if ECGC is satisfied that the bank had conducted the account with normal banking prudence and has also complied with the terms and conditions of the Guarantee. Any amount that is recovered by the bank after the settlement of the claim has to be shared between the Corporation and the bank in the same ratio in which the loss was originally borne by them.

undertake to obtain cover for packing credit advances granted to all its customers on all-India basis. In consideration of the large volume of business offered for cover and the spread of risks that will thus become available to it, the Corporation grants a higher percentage of cover, lower premium rate and considerable reduction in procedural formalities. A differential premium rate is now applicable for the banks, which have opted for WTPCG. The rates vary between 7 paise to 10 paise per ` 100 per month payable on the average outstanding for the month. The rate for each bank is fixed based on the actual claim premium ratio for the bank for the period of immediately preceding five years. The percentage of cover is normally 75% for most of the banks (except a few banks for which it is 65%, taking into account the extremely high claim premium ratio of those banks). There is a reduction of 10% in the cover if the total advance sanctioned to any particular exporter exceeds the total premium received from the bank (for all the accounts put together) in the immediately preceding year; even in respect of such exporters, the lower percentage of cover will apply only for the advances sanctioned over and above the value of such total premium.

Export Production Finance Guarantee

The purpose of this Guarantee is to enable banks to sanction advances at the pre-shipment stage to the full extent of cost of production when it exceeds the f.o.b. value of the contract/order, the differences representing incentive/duty drawback receivable.

Post-Shipment Credit Guarantee

Post-shipment finance given to the exporters by banks through purchase, negotiation or discount of export bills or advances against bills sent on collection basis qualifies for this guarantee. It is necessary, however, that the exporter concerned should hold suitable policy of ECGC to cover the overseas credit risks.

The premium rate for this guarantee is 7 paise per ` 100 per month. The percentage of loss covered under the Individual Post-Shipment guarantee is 75.

This guarantee can also be issued on whole turnover basis, offering a higher percentage of cover at a reduced rate of premium. The percentage of cover under the Whole-turnover Post shipment Guarantees is 90 for advances granted to exporters holding ECGC policy. Advances to non-policyholders are also covered with the percentage of cover being 65. The premium rate is 5 paise per ` 100/- per month if advances against L/C bills are also covered under the guarantee and 6 paise otherwise.

Individual Post-Shipment Credit Guarantee can also be obtained for finance granted against L/C bills, even where an exporter does not hold an ECGC Policy, provided that the exporter makes shipments solely against Letters of Credit. The premium rate for this cover is 10 paise per ` 100 per month on the highest amount outstanding on any day during the month and the percentage of cover is 75. Advances against bills under Letters of Credit/ confirmed orders from banks/buyers in countries placed under restricted cover shall, however, be subject to prior approval of the Corporation.

Export Finance Guarantee

The guarantee covers post-shipment advances granted by banks to exporters against export incentives receivable in the form of cash assistance, duty drawback, etc.

The premium rate for his guarantee is 7paise per ` 100/- per month and the cover is 78 percent. Banks having WTPSG are for concessionary premium rate and higher percentage of cover.

Export Performance Indemnity

Exporters are sometimes called upon to execute bonds duly guaranteed by an Indian bank at various stages of export business. An exporter who desires to quote for a foreign tender may have to furnish a bank guarantee in the form of a bid bond. If he wins the contract, he may have to furnish bank guarantees to foreign buyers to ensure due performance or against advance payment or in lieu of retention money or to a foreign bank in case he has to raise overseas finance for his contract.

Further, for obtaining import licenses for raw materials or capital goods, exporters may have to execute an undertaking to export goods of a specified value within a stipulated time, duly supported by bank guarantees. Bank guarantees are also furnished by exporters to the Customs, Central Excise, or Sales Tax authorities for the purpose of clearing goods without payment of duty or for exemption from tax for goods procured for export. Exporters may also be required to furnish guarantees in support of export obligations to Export Promotion Councils, Commodity Boards, The State Trading Corporation of India, the Minerals and Metals and Metals Trading Corporation of India or recognised export Houses.

An export proposal may be frustrated if the exporter’s bank is unwilling to issue a guarantee, which the exporter may be required to furnish. The Export Performance Guarantee provided by ECGC is aimed at helping the exporter in such cases. The Guarantee, which is in the nature of a counter guarantee to the bank, is issued to protect the bank against losses that it may suffer on account of guarantees given by it on behalf of exporters. This protection is intended to encourage banks to give guarantees on a liberal basis for export purposes.

Normally, cover is extended upto 75 percent of loss in the case of guarantees in connection with bid bonds, performance bonds, advance payment and local finance guarantees and guarantees in lieu of retention money. In the case of bid bonds relating to exports on medium/long term credit, overseas projects, and projects in India financed by international financial institutions as well as supplies to such projects, ECGC is agreeable to issue Export Performance Guarantee on payment of 25% of the prescribed premium. The balance of 75% becomes payable by the bankers if the exporter succeeds in the bid and gets the contract.

While the premium rate for guarantee issued to cover bond relating to exports on short-term credit is 0.90% p.a. for 75% cover, it is lower for bonds relating to exports on deferred credit and projects, namely 0.80% p.a. for 75% cover and 0.95% p.a. for 90% cover.

Export Finance (Overseas Lending) Guarantee

If a bank financing an overseas project provides a foreign currency loan to the contractor, it can protect itself from the risk of non-payment by the contractor by obtaining Export Finance (Overseas Lending) Guarantee. The premium rate is 0.90% per annum for 75% cover and 1.08% per annum for 90% cover. Premium is payable in Indian Rupees. Claims under the Guarantee will also be paid in Indian Rupees.

Special Schemes

Transfer Guarantee

When a bank in India adds its confirmation to a foreign Letter of Credit, it binds itself to honour the drafts drawn by the beneficiary of the Letter of Credit without any recourse to him provided such drafts are drawn strictly in accordance with the terms of the Letter of Credit. The confirming bank will suffer a loss if the foreign bank fails to reimburse it with the amount paid to the exporter. This may happen due to the insolvency or default of the opening bank or due to certain political risks such as war, transfer delays or moratorium, which may delay or prevent the transfer of funds to the bank in India. The Transfer Guarantee seeks to safeguard banks in India against losses arising out of such risks. Transfer Guarantee is issued, at the option of the bank to cover either political risks alone, or both political and commercial risks. Loss due to political risks is covered up to 90% and loss due to commercial risks upto 75%.

Premium will be charged as rates normally applicable to the corporation’s insurance policy covering export of goods.

Overseas Investment Guarantee

ECGC has evolved a scheme to provide protection for Indian Investments abroad. Any investment made by way of equity capital or untied loan for the purpose of setting up or expansion of overseas projects will be eligible for cover under investment insurance.

The investment may be either in cash or in the form of export of Indian capital goods and services. The cover would be available for the original investment together with annual dividends or interest receivable.

The risks of war, expropriation and restriction on remittances are covered under the scheme. As the investor would be having a hand in the management of the joint venture, no cover for commercial risks would be provided under the scheme. For investment in any country to qualify for investment insurance, there should preferably be a bilateral agreement protecting investment of one country in the other. ECGC may consider providing cover in the absence of any such agreement provided it is satisfied that the general laws of the country afford adequate protection to the Indian investments.

The period of insurance cover will not normally exceed 15 years in case of projects involving long construction period. The cover can be extended for a period of 15 years from the date of completion of the project subject to a maximum of 20 years from the date of commencement of investment. Amount insured shall be reduced progressively in the last five years of the insurance period.

Exchange Fluctuation Risk Cover

The Exchange Fluctuation Risk Cover is intended to provide a measure of protection to exporters of capital goods, civil engineering contractors and consultants who have often to receive payments over a period of years for their exports, construction works or services. Where such payments are to be received in foreign currency, they are open to exchange fluctuation risk as the forward exchange market does not provide cover for such deferred payments.

Exchange Fluctuation Risk Cover is available for payments scheduled over a period of 12 months or more, upto a maximum of 15 years. Cover can be obtained from the date of bidding right up to the final instalment.

At the stage of bidding, an exporter/contractor can obtain Exchange Fluctuation Risk (Bid) Cover. The basis for cover will be a reference rate agreed upon. The reference rate can be the rate prevailing on the date of bid or rate approximating it. The cover will be provided initially for a period of twelve months and can be extended if necessary. If the bid is successful, the exporter/contractor is required to obtain Exchange Fluctuation (Contract) cover for all payments due under the contract.

The reference rate for the contract cover will be either the reference rate used for the Bid Cover or the rate prevailing on the date of contract, at the option of the exporter/ contractor. If the bid is unsuccessful 75 percent of the premium paid by the exporter/ contractor is refunded to him.

The Exchange Fluctuation Risk (Contract) Cover can be issued, if the payments under the contract are scheduled to be received beyond 12 months from the date of contract but in such cases, the cover will apply for any instalment falling due within 12 months as well. Cover will be available for all amounts receivable under the contract, whether it is payment for goods or services or interest or any other payment. Contracts coming under Buyer’s credit and Line of Credit are also eligible for cover under the schemes.

Cover under the schemes is available for payments specified in US Dollar, Pound Sterling, Deustche Mark, Japanese Yen, French Franc, Swiss Franc, UAE Dirham and Australian Dollar. However, cover can be extended for payment specified in other convertible currencies at the discretion of ECGC.

Exchange Fluctuation Risk Cover will normally be provided along with suitable credit insurance cover. There is, however, provision to grant the cover independently also in which case premium will be loaded by 20%.

The contract cover provides a franchise of 2 percent loss or gain within a range of 2 percent of the reference rate will go to the exporter’s account. If the loss exceeds 2 percent, ECGC will make good the portion of loss in excess of 2 percent but not exceeding 35 percent of the reference rate. In other words, loss/gain upto 2 percent and beyond 35 percent of the reference rate will be to the exporter’s account. If there is gain in excess of 2 percent and upto 35 percent it will be to ECGC account.

The rate of premium is 40 paise per ` 100/- per year or 10 paise per ` 100/- per quarter for the bid cover. The total premium is payable at the time of issue of the Policy. Premium for contract cover is also payable at the rate of 40 paise per ` 100/- per annum. Ten percent of the total premium payable and premium for the first two years should be paid at the time of issue of the Policy. Thereafter, the annual premium will have to be paid in such a manner that premium for.